How to Invest Graduation Gift Money

The generosity of family and friends leaves many recent college graduates with a relatively hefty amount of cash in their bank accounts waiting to be spent on one thing or another. Some use the money as a down payment on a new car, or the first-last and security payments on a new apartment and some even use it to treat themselves to a vacation after four hard years of studying and socializing. If a good job is landed, hopefully a series of employer provided benefits will be matched with a decent sized paycheck. Time to get to work and to put that money to work as well.

Matching a work-life balance with finances is a challenging task for many young people. What's more challenging is planning and saving for the future, which after a couple years of the "real world," years can feel like months and that first house, children or even retirement don't seem so far away. A regular savings account is an excellent thing to have, especially with scheduled withdrawals from a directly deposited checking account each week.

A bonus in many work places is a 401(k) retirement savings plan where the employer will match a set percentage of money to your retirement account. This means if an employee commits 5% of his or her paycheck to the 401(k) account each paycheck and the employer happens to match up to 5%, the employee is getting 10% of the paycheck deposited for only half of the actual money. This can double the amount of money that winds up in an account each week. That, plus compounding interest will make for a great little nest egg when retirement or a major purchase comes up in a decade or two.

Investing in stocks and bonds can also be a fun hobby to take up that has some potential for return. There are lots of books published on "fool proof" techniques on how to make money off of the stock market, but the best ones likely take an objective look at how the market works and try to educate and enlighten on how one can do independent research for stocks. Learning to read a company's spreadsheet or study a sector's key players with a keep eye can be addicting. It even seems like the stocks that are on the watch list waiting to be bought are doing nothing but go up in value until the minute you purchase them.

Discipline is key and it is important to dabble in investing, but don't be the farm, especially when there's rent to be paid and only a little bit of money in the bank. Enjoy a percentage of your savings from graduation gifts, work savings, etc and budget yourself out some disposable cash to play with in the market. Investing can be a lot like gambling, but it doesn't have to be if prudence is put first over greed.

Generally there are no pass or fail techniques for recent graduates to take, but rather a balance of good judgement and preventative measures that over time will pay dividends. Tread lightly and save your money!